Big guns eye KFC Botswana franchise

Kemoreilwe Jimson & Koobonye Ramokopelwa - BG reporters
Friday, 02 September 2016
Big guns eye KFC Botswana franchise

More than sixty companies have positioned themselves to snap up shares of one of the country’s well-known fast food selling outlet, KFC Botswana, following a High Court ruling which gave the nod to liquidation of previous owners and opened a marathon takeover of the company.

This week, Lobatse High Court Judge, Michael Leburu ruled that the group of 12 companies that has been operating a Kentucky Fried Chicken (KFC) franchise business in Botswana be placed under final liquidation. The KFC franchisee, which sources said is worth millions of Pula, has attracted the attention of well known companies who are ready to open their purse to acquire the franchise rights of the company, which is better known for stimulating the taste buds of the rich market. Botswana Guardian understands that the country’s biggest retail outlet Choppies Enterprise Limited is one of the companies that have shown interest in acquiring the franchisee. Choppies Arch-rival, Sefalana Holdings has also signaled interest to purchase the local unit of KFC, a fast food company originally from Kentucky, United States. Another company, UNIGEM, which is owned by a group of trade unions, is also understood to be drooling at the prospect of getting a slice of KFC franchise.

Representatives of the named companies this week declined to comment further on their intentions to acquire the franchise of the fast food selling company.  Reached for comment, Otsile Marole, Regional Marketing and Communications Manager Choppies Group said, “Choppies has never been interested in the purchase of KFC.” Choppies is a Botswana based company which has operations in Africa. Two years ago, the BSE quoted company launched Choppies Fried Chicken (CFC). This is a remake of KFC some people have said. If Choppies get the nod to acquire KFC, indications are that they will likely wind-up their in-house restaurant and replace it with KFC. Choppies has the financial muscle to acquire the company. In the past, Choppies CEO, Ram Ottapathu said their expansion will be in a mixture of Greenfield and brownfield projects across all their lines of product offering.

This week all efforts to reach Sefalana top executives proved futile. The company which is breathing on the neck of Choppies as far as fast moving consumer goods is concerned, has also been expanding across all products and services. The BSE company has also acquired fruit juice making company, Golden Fruit and milk producer, Delta Dairies. Chief Executive of Unigem, Julian Willie this week declined to say specifically if they are interested in the business or not. Unigem suffered a setback two years ago after government terminated a contract worth P500 million under which it was granting personal and property loans to civil servants on behalf of government. Willie said the company is focusing on business they currently operate. 

KFC Botswana has been hit by financial challenges which have affected their ability to keep creditors away. For example, a loan from leading bank, FNB Botswana was not paid in full. Other financial houses are also said to be owed by the same franchisee.
At the end, it was decided that the company be placed under liquidation as it could no longer afford to run its affairs in a sound business manner.

However, interested buyers of the company have been patiently waiting for the final liquidation judgment of a group of companies that has been operating different KFC stores in the country. Provisional Liquidator, Nigel Dixon-Warren has since dispatched a note to interested buyers saying, “Since the communication on 14 July 2016 I am pleased to advise that the hearing on whether the companies should be placed in final liquidation has taken place in the High Court of Botswana and judgment on the matter is expected on 30 August 2016. I will, of course, notify you of the outcome. If the judge decides the companies should be finally wound up then the sale process of the business as a going concern will commence in earnest in September and I will write to you early in the month with a revised timetable for the transaction process.”

This week Warren confirmed that 69 companies have submitted to buy the ailing franchise. But he could not confirm the value of KFC as he said they are waiting to see its projections. “Next week we would be starting the sale process and we expect to finish in three months,” he said. Troubles at KFC started in April 2015 when the Franchisor, Yum Restaurants (Pty) and VPB PROPCO (Pty), which was running KFC Botswana, terminated the agreement with companies which operated KFC stores in Botswana over non-payment of franchise fees.

Before the termination of the franchise agreement, a third party potential buyer, namely Country Bird Holdings (Pty) Ltd, entered into a series of conditional sale agreements with the respondents (VBP PROPCO) for purpose of acquiring the franchised KFC business. One such agreement was concluded in December 2015, providing therein certain conditions precedent that were to be fulfilled on the 1st March 2016.

In terms of the proposed agreement of sale with Country Bird Holdings, the 1st respondent accepted a purchase price of P60 million, for the assets and undertaking of the KFC business as a going concern. The said conditional sale of business to CBH ultimately failed due to non-fulfillment of the conditions precedent. As at 1st May 2016, the creditors to the KFC franchise business operated stood at close to P106 million. The said amount is contained in a document that was used during negotiations to sell the business to Country Bird Holdings. 

When they applied for KFC to be wound up First National Bank Botswana, as the petitioner, said KFC Botswana did not have the ability to carry on the franchise business and further that they do not have any means of generating revenue.
“It is the Petitioner’s case that the Respondents have committed numerous acts of insolvency as reflected by the Respondents’ attempt to compromise its debts with creditors, namely the Franchisee, the Petitioner and potential buyers namely CBH,” said Justice Leburu.

In his defence as the company director, Anthony Siwawa said the franchisor’s conduct by alerting the respondents’ financiers and creditors about their financial position was a ploy by the franchisor to tarnish the image of the respondents, so that the franchisor’s preferred buyer of the KFC Business, namely Callus, would be handed the business on a silver platter. They deny that they are insolvent.

Last modified on Friday, 02 September 2016 15:24

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